The Federal Communications Commission (FCC) voted yesterday to support a series of rules that we more commonly reference as “Net Neutrality.” These rules will reclassify broadband Internet access as a Title II telecommunications service, subjecting them to regulation similar to that of a utility or common carrier.

The concern driving Net Neutrality has focused on consumer broadband access and networks, highlighting such notions as blocking of internet sites and throttling of traffic such as BitTorrent. However, some of the associated headlines really have nothing to do with the access part of the network. Instead, they are related to network interconnects, which are the lurking issue under much of what we call Net Neutrality.

The Netflix Factor
Netflix is a poster child for and big supporter of Net Neutrality. Netflix has received a lot of press for its conflicts with Comcast and Verizon, followed by coverage of its deals with them. Some examples:

These deals don’t affect how traffic is treated on the networks of Internet Service Providers (ISPs) such as Comcast or Verizon. In both cases, the Netflix traffic is treated “neutrally,” the same as other traffic. So what are these deals about?

It’s All About Peering
Instead, these deals are about network interconnects or “peering,” and cover the instances where ISPs and backbone providers have an interface (“peering point”) to pass traffic back and forth. Here’s a description of peering from Wikipedia:

In computer networking, peering is a voluntary interconnection of administratively separate Internet networks for the purpose of exchanging traffic between the users of each network. The pure definition of peering is settlement-free, “bill-and-keep,” or “sender keeps all,” meaning that neither party pays the other in association with the exchange of traffic; instead, each derives and retains revenue from its own customers.

Today, network operators create peering points with each other based on mutually beneficial locations and traffic loads. Usually, these are settlement or payment free because of reasonably balanced traffic. When there is an imbalance, one party “settles” with or pays the other for access. For a detailed description of the high-level structure of the internet and how peering and settlements work, please see “Comcast vs. Netflix: Is this really about Net neutrality?

Netflix has asserted that Comcast and Verizon were throttling Netflix traffic at the peering point in an attempt to extract payment for transit. My sources at Verizon say this was not the case, and instead that the bottlenecks were due to poor network engineering on the part of Netflix and their backbone network providers. In both cases, Netflix wound up paying for a direct peering point (no intermediary provider) and possibly larger bandwidth. At the same time, Netflix continued to press for a broader definition of Net Neutrality to cover peering or interconnects.

Net Neutrality Redux
Yesterday the FCC voted to adopt Open Internet rules and to reclassify broadband Internet access as a Title II telecommunications service. The FCC also voted to forbear from (omit) 27 provisions of Title II. The rules have not yet been published because “editorial privilege” (opportunity to edit after the vote) was granted. However, the rules will subject interconnections to FCC scrutiny and regulation. A preview of what the regulations may look like is found in this excerpt from a Reuters story from January 28, 2015 on “U.S. net neutrality rules expected to cover interconnection deals”:

The new draft is expected to expand the authority of the FCC to previously unregulated traffic exchange deals, known as interconnection agreements, according to two sources who spoke anonymously because the plan has not been made public.

“It’s the only way they can make it work with the principles that President (Barack) Obama outlined and Chairman Wheeler reaffirmed,” said David Schaeffer, chief executive of Cogent Communications Group Inc., a long-haul Internet traffic carrier that has advocated for regulation of interconnection deals
[FCC officials] said the discussion was very fluid and several options were considered, including a case-by-case approach to resolving complaints, which would be more palatable to ISPs, or an outright ban on fees for interconnecting with networks, which Netflix has sought.

A Quiet Expansion of Net Neutrality
The previous version of Net Neutrality was based on the FCC’s Open Internet Report and Order, which was issued in December 2010. It applied only to “mass-market” broadband internet services with access to “substantially all Internet endpoints.”

With this latest vote, the FCC has substantially expanded the scope of Network Neutrality to include peering. This may extend the impact of Net Neutrality to cover non mass-market business services, such as VPN.

I believe that regulation of interconnects may be the big impact of this latest round of Net Neutrality. There’s a lot more to come before we know exactly how yesterday’s ruling impacts our industry and our internet experience. Stay tuned!